Introduction
Judging from the frequent feedback, which readers of this column regularly provide to me it seems they are very impressed by the exceptional speed with which Guyana has been able to move from its First Find [May 2015] to its First Oil [December 2019]. And further to this exceptional behaviour of its petroleum creaming curve, they continue to remain impressed that, within the very first three years of production 2020 – 2022 Guyana has reached a position where the Lead Contractor in the oil sector boasts of 10 billion-plus barrels of oil equivalent, boe, in proven resources.
As noted, by H1 2020, Guyana had been speedily classed as the newest emerging Petrostate, and further interrogated by scholars with strong credentials in the extractivist and neoextractivist schools of thought [Canterbury D and Clavijo W].
As indicated previously, neoliberal schools of thought were by no measure laggards in this regard. Two leading international development agencies/banks separately produced two in-depth analyses and policy prescriptions; namely the Inter-American Development Bank’s IADB, [Traversing A Slippery Slope, Guyana Oil Opportunity, 2020] and the World Bank’s, [A Pivotal Moment for Guyana: Realizing the Opportunities, Systematic Country Diagnostic, 2020]. I have already noted that in this column series I have reviewed the IADB study at some length.
The concepts of extractivism/neoextractivism and liberal/neoliberal have been variously subjected to different interpretations. My interest is not in textual exegesis so I am happy to proceed from areas of widest agreement. I did this in the case of extractivism/neoextractivism and here I do the same below for other similar attributions made in the treatment of the World Bank SCD.
Neo-liberal economics explained
To start with by neo-liberal economics I refer, at a base level, to the political, economic and social arrangements within society that emphasize 1] market relations 2] re-framing the role of the state and 3] giving primacy to individual responsibility in the many dimensions of social life. There is, I believe broad consensus among analysts that neo-liberal economics can be broadly defined, as the extension of competitive market processes into virtually all areas of life, and specially including the economy, politics and society.
As the Handbook of Neo-liberalism puts it, “the concept is contemporarily used to refer to market-oriented reforms”. Such market-oriented reform policies include “eliminating price controls, deregulating capital markets, lowering trade barriers and reducing, specially through privatization, state influence in the economy”. It is also commonly associated with the economic policies introduced under the Washington Consensus and World Bank and IMF, a development model that seeks the rejection of structural economics in favour of the Washington Consensus.
Indeed:
1. “As an ideology it denotes a conception of freedom as an overarching social value associated with reducing state functions to a minimum.
2. As a public policy, it involves the privatization of public economic sectors and the deregulation of private corporations, sharp decree of government budget deficits and reduction of spending on public works”.
Neo-classical Economics and Neo-liberalism
Investopedia classes neoclassical economics as a broad theory that focuses on supply and demand as the driving forces behind the production, pricing, and consumption of goods and services. This is underscored by three assumptions; namely rational thinking: [people make rational choices between options based on the value that they identify in each choice]. maximizing: [consumers aim to maximize utility, while businesses aim to maximize profits information: [people act independently based on having all the relevant information related to a choice or action].
Local readership is regularly exposed to what I have broadly classed as 1] standard neoclassical economics and 2] standard modern macroeconomics. Presently; these writings dominate the literature on Guyana’s economy therefore commentary on the relation of these concepts may prove to be useful. Of note, the vast preponderance of economic writings on Guyana emanate from government documents, international agencies and researchers [local and foreign based.]
For starters, it is widely acknowledged that, neoclassical economics is closely related intellectually to classical liberalism, which is the so-called intellectual forefather of neoliberalism. In a sense, the neoliberal movement between 1960 and 1980 is widely represented as a partial return to the neoclassical assumptions about economic policy and partial rejection by analysts of the failed central planning arguments of the 1930s.
As far as public policy is concerned, neoliberalism borrowed from the assumptions of neoclassical economics to argue for free trade, low taxes, low regulation and low government spending. It often deviated in terms of anti-trust and externality arguments.
Modern Macroeconomics
Readers may query how is modern macroeconomics different from traditional macroeconomics? The answer is modern macroeconomics seeks to explain the aggregate economy using theories based on strong microeconomic foundations. This is in direct contrast to the traditional Keynesian approach to macroeconomics, which is based on ad hoc theorizing about the relations between macroeconomic aggregates.
Concluding Observation
Although critical of neoliberal method and premises it remains in my opinion at the forefront of policy analysis and prescriptions based on strong empirics. This may reflect the institutional capacities of its main purveyors. International and regional agencies.
